When Not To Sell A House To A House Investor

Tuesday, January 16, 2018
- by Michael Rogers

We have all seen the internet ads or mailings that say, “We Buy Ugly Houses” or “We’ll Buy Your House for Cash Fast”. These advertisements are from investors that buy houses. They typically buy the house “as-is”, pay cash and are flexible on closing date. For several situations, investor home buyers are a great solution to selling a house. This article describes three situations it’s not in a seller’s best interest to sell to an investor.

House is in Great Shape

Do you have a house that is in great shape? It doesn’t have any structural or cosmetic issues.

Basically, it has few or none of the following issues: old roof, moisture issues, plumbing issues, electrical issues, old light and plumbing fixtures, outdated kitchen, old HVAC system, old water heater, out dated kitchen, single pane windows, painting, landscaping, etc.

If the house is already in great shape, then a seller will usually get more money by listing the property on the MLS. Listing on the MLS can be done through a local realtor or a do it yourself listing service such as www.mlstosell.com. A typical full-service realtor will charge 6% of sales price and this fee will be split between the buyer and seller’s realtors. If you list it yourself, then you can typically save 3% by only having to pay a commission to the buyer’s realtor.

Not Motivated to Sell

If a seller is in a situation where getting full-price is the primary objective and she can wait a couple years to sell her house, then selling to a house investor probably won’t work. An un-motivated seller is typically a person that wants to get top price for the property and they don’t mind holding the property until they get the price they want. Oftentimes, the house has no mortgage, the seller doesn’t need money, or the property is rented to good tenants. The unmotivated seller’s best option is to hire a realtor to list the property and see if someone will come along willing to pay the price they want.

Weekend Warrior

Are you handy around the house? Do you enjoy weekend “Do it Yourself” projects such as painting, changing light fixtures, updating bathroom tile? Then you are a weekend warrior. In most cases, a weekend warrior that is willing to sacrifice their nights and weekends can make smaller repairs and updates at a substantial savings to a contractor’s price. Since a professional home investor will be paying a licensed contractor to make these repairs it will come out cheaper for the homeowner to make the repairs themselves and sell it for a higher profit.

When it Typically Makes Sense

For a professional home buyer to stay in business, they must purchase the house at a price where they can pay for repairs, allow for a margin of safety for any items they miss in the estimate, pay loan costs, property taxes, insurance, etc. while the home is remodeled. They also must price in a profit for the 3 to 12 months they will be working on the property. Therefore, they aren’t typically able to offer the highest price. However, a good house buyer will make the selling process super easy for the seller. They will provide excellent service, buy the property as-is, and close on the date of the seller’s choosing.

In my experience, the most common situation that a professional home buyer can buy a house and create a win-win for both the buyer and seller is when the seller has inherited a house that has a lot of deferred maintenance. Typically, the seller is not a handyman and is not interested in managing contractors or investing an additional $20,000 to $50,000 in repairs to get the house ready to sell. In this case a home buying investor can buy the property as-is, pay cash, and close on the date of the sellers choosing. This creates an easy solution for the seller.

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